President proposes $2.4 trillion budget

Tuesday, February 3, 2004

By Alan Fram, The Associated Press

WASHINGTON -- President Bush proposed a $2.4 trillion budget on Monday slicing scores of programs from prisons to arts education in the face of record federal deficits and the costs of war. His budget chief warned a fresh request for operations in Iraq and Afghanistan could reach $50 billion.

The election-year blueprint would pour funds into the military, domestic security and some education and health initiatives. It provides the first dollars for what ultimately could be a hugely expensive effort to visit Mars, and renews his call for making permanent the tax cuts he has moved through Congress.

Handcuffed by shortfalls he projects will surge to an unprecedented $521 billion this year, the spare plan for 2005 offers few dramatic initiatives. It is aimed mostly at familiar Bush priorities like war, terrorism, the economy and struggling schools plus a new goal: halving the deficit in five years, which he projects he will achieve with a 2009 shortfall of $237 billion.

"I'm confident our budget addresses a very serious situation," he said at a Cabinet meeting. "And that is that we are at war and we had dealt with a recession. And our budget is able to address those significant factors in a way that reduces the deficit in half."

Last year's deficit hit $375 billion, the highest ever in dollar terms. Though Bush projects next year's red ink at $364 billion, that excludes U.S. military efforts in Iraq and Afghanistan, which White House budget director Joshua Bolten said could hit an "upper limit" of another $50 billion.

"Hopefully the needs will be less, but it will all depend entirely on the security situation," said Bolten.

Administration officials say that request would come next year -- after this November's presidential and congressional elections.

"Today the president released a budget that deepens the deficits that his policies have helped to create," said Rep. John Spratt, D-S.C., of the House Budget Committee.

Borrowing 22 percent

If Bush's deficit and spending projections come true, the government will borrow 22 percent of what it spends this year and 15 percent next year. His plan sets aside $178 billion next year just for paying interest on its debt.

Bush provided few details on how he would halve deficits, other than broad references to economic growth and spending restraint.

His budget assumes the one-third of the budget Congress writes every year -- the rest is automatically paid benefits like Social Security -- will grow by a total of 3.7 percent over the next five years. That figure is so low lawmakers are unlikely to heed it.

Bush also proposed $1.1 trillion in tax cuts over the next decade, mostly to renew expiring reductions for individuals and businesses but also reworked plans to encourage saving.

Bolten, the budget chief, said Bush wants to eliminate 65 programs for a savings of $4.9 billion and cut 63 others. Congress has ignored such proposals before.

Though Bush proposed an overall 3 percent education increase -- a figure Democrats say is too skimpy -- 38 programs slated for extinction were in the Education Department. They included a $35 million arts in education program, school counseling and Even Start for improving poor children's reading skills.

Programs Bush would cut include water projects, rural conservation, aid to state and local law enforcement agencies, the Amtrak passenger railroad, and federal prisons, which would drop from $4.76 billion to $4.71 billion.

The president's budget is a proposal that triggers work on spending legislation by Congress, which is controlled by Republicans.

The year is likely to be fractious because of divisions between conservative GOP lawmakers who want even deeper cuts in spending and deficits, and moderates wary of slashing too deeply, especially while seeking re-election.

'The right direction'

Conservative unease intensified by the budget's upward re-estimate -- by one-third -- of the 10-year cost of the newly enacted Medicare overhaul to $534 billion.

"This budget is a step in the right direction and I am hopeful that working with other members of Congress we can do even more," said conservative Rep. Jeb Hensarling, R-Texas.

Overall, Bush's budget would boost spending by 3.5 percent. Revenue would grow by 13.2 percent to $2.04 trillion -- underscoring the administration's reliance on economic growth to make the red ink subside.

House Appropriations Committee chairman Bill Young, R-Fla., whose panel controls spending, said nondefense programs are less than one-fifth of the budget, limiting their potential impact on reducing the deficit.

Warning that all should be "prepared to make sacrifices," Young said he would examine Bush's proposals "to see if we can afford them in a lean budget year."

Bush's plan proposes letting defense spending grow by 7 percent next year -- not including Iraq and Afghanistan costs this year and next -- and domestic security increasing 10 percent.

All other programs approved annually by Congress would grow by 0.5 percent, well below the inflation rate.

To achieve that, Bush proposed outright cuts in the budgets of seven of the 16 Cabinet-level agencies, including Agriculture, Justice and the Environmental Protection Agency.

He would also pare federal reimbursements to states for running Medicaid programs -- another proposal with little likelihood of enactment.